All About the Chips

Wednesday, August 6th, 2025

World News - MAGA’s Disenchantment With Israel 

Economists

Cracks are appearing in what was once near-unanimous Republican support for Israel, revealing a growing disenchantment within the MAGA base. While party leaders like Speaker Mike Johnson affirm unwavering allegiance to Israel, echoing longstanding GOP orthodoxy, some MAGA-aligned figures—including Marjorie Taylor Greene and influential voices like Tucker Carlson and Steve Bannon—have begun openly criticizing the alliance. Their dissent, often couched in America First rhetoric, is fueled by fears of Middle Eastern entanglements and moral outrage at civilian suffering in Gaza, with Greene even labeling Israeli actions as “genocide”—a term more common on the left. Polls show that while conservative support for Israel remains strong overall, it is slipping, especially among younger Republicans heavily exposed to images of Palestinian hardship online. Despite Donald Trump maintaining public support for Israel, his unpredictable approach and the vocal skepticism among some in his coalition signal a fracturing GOP consensus, suggesting that MAGA disenchantment may increasingly shape U.S. policy and rhetoric regarding the Jewish state.

Tech - AMD Slips After Earning

CNBC

AMD reported mixed second-quarter results: revenue for Q2 2025 came in at $7.69 billion, beating analyst expectations of $7.41 to $7.43 billion, while adjusted earnings per share (EPS) were $0.48, just shy of the $0.49 expected. Net income jumped to $872 million, or $0.54 per share, up from $265 million a year earlier. The revenue beat was driven by strong demand in both the data center ($3.2 billion, up 14% year-over-year) and client and gaming segments ($3.6 billion, up 69% year-over-year), with notable success from new desktop CPUs and custom gaming chips. Despite record sales and robust growth—particularly in AI products—profitability was hampered by approximately $800 million in charges related to U.S. export controls on its MI308 AI GPUs destined for China, which weighed down margins and contributed to the EPS miss. Looking forward, AMD anticipates Q3 sales of about $8.7 billion (±$300 million), topping Wall Street expectations and driven by optimism surrounding the ramp-up of its next-generation Instinct MI350 AI chips and continued momentum in EPYC and Ryzen CPUs. However, ongoing uncertainty around export waivers for China and competitive pressure from Nvidia are key risks, even as major customers like Meta and OpenAI look to diversify away from Nvidia's dominance in the AI chip market.

Business - China Hits Obstacles in State Push to Consolidate the Chips Sector 

FT

China’s push to consolidate its fragmented semiconductor sector into a few state-backed champions—aimed at rivaling US and European giants—has hit significant obstacles in 2025. Beijing’s attempts, such as state-led merger talks among chip equipment makers, have faltered due to disputes over ownership structures and valuations. Many prospective sellers are reluctant to sell assets at a loss, while buyers reject inflated prices. Despite a rise in semiconductor acquisition deals, including major moves like the proposed Hygon-Sugon merger, consolidation in China’s chip sector remains slow, with numerous acquisitions failing to close. The chip equipment segment, in particular, lacks major players able to offer integrated solutions to local fabs, which must still piece together technology from disparate vendors—harming efficiency. Underlying these challenges are fragmented investments, misaligned incentives, and risks that consolidation alone may not generate the breakthroughs needed for true technological self-sufficiency. Local government stakes in foundries complicate M&A, as officials are wary of reporting losses on state-backed assets. As a result, while deal activity is up, political, financial, and technological hurdles continue to slow Beijing’s efforts to produce globally competitive “national champions” in semiconductors.

Culture - America’s Fertility Crash

Economists

America’s fertility rate has reached a new historic low, with recent CDC data showing the average number of children per woman falling below 1.6 nationwide—down from 3.6 in 1960 and well below the replacement rate of. This latest drop is striking not just in traditionally low-fertility, urban states, but especially in historically high-fertility states such as Utah, Alaska, and North Dakota, where rates have plummeted in the past decade. The decline is largely attributed to fewer unplanned births among young women, delayed childbearing, and broad cultural and economic shifts, overriding factors like religiosity, family structure, or rural living that once insulated certain regions. Even regions with more religious or pro-natalist cultures are now seeing steep decreases, challenging previous policy assumptions and prompting national concern over whether birth rates can ever recover.

The Daily Spark 

We expect that the Hong Kong dollar peg will hold. The Hong Kong Monetary Authority (HKMA) has large reserves to intervene, and the peg is a cornerstone of Hong Kong’s success as a global financial center.

But there are pressures on the Hong Kong dollar peg. After Liberation Day, the US dollar depreciated significantly. As a result, capital started flowing into Hong Kong, and the Hong Kong dollar appreciated so much that it reached the strong limit of the trading band relative to the US dollar.

In response, a few weeks after Liberation Day, the HKMA lowered Hong Kong interest rates to zero. As a result, there is now a significant gap between interest rates in the US and in Hong Kong, which is putting pressure on the peg because investors can now borrow in Hong Kong dollars and invest in US dollars, earning a significant return as long as the peg holds.

This has increased discussion among macro investors about the Fleming-Mundell policy trilemma, which says that a country cannot simultaneously have 1) a fixed exchange rate, 2) free capital movement and 3) an independent monetary policy.

The bottom line is that we expect the Hong Kong dollar peg to hold. But investors should be aware of the mounting pressures, as abandoning the peg would have significant implications for global markets.

Song Recommendation - Know You Naked 

Quote of the Day 

"We are all apprentices in a craft where no one ever becomes a master." — Ernest Hemingway